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This is related to a previous question (link).

We frequently sell items on PayPal for which there are no receipts, or which it would be terribly burdensome to save receipts. For example:

Children's shoes, which we've bought secondhand, that we have sold again. Original price may have been $60-80, we bought for $30, used, and sold for $20. We don't have the original receipt because we weren't the original buyer.

Clothing we bought many years ago that was worn by both of our children and then sold several years later. Original price may have been $50, and we sold for $20. We did not save the receipt for that long.

We usually make many of these sales over the year, and they often add up to over $600. Knowing that we will receive an 1099 for our sales like this in 2023 (for tax year 2022), what is a good plan for proving the sales were personal items sold at a loss?

Is a spreadsheet we maintain showing our best estimate of the original price and the resale price good enough should we be unlucky enough to be audited?

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  • Are you sure that PayPal will send a 1099?: paypal.com/us/webapps/mpp/irs6050w
    – minou
    Feb 6, 2022 at 15:52
  • Quite sure. It's been a recent news item
    – nuggethead
    Feb 6, 2022 at 16:05
  • @gaefan as far as I know they will send 1099s for all accounts that gross over $600 beginning with tax year 2022. The same is true for Venmo and other similar services. But correct me if I'm wrong!
    – nuggethead
    Feb 6, 2022 at 16:19

1 Answer 1

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Just saying: if you bought new shoes for $60, your children wore them for years, and you sell them for $20, you don’t have a $40 loss. That’s because the value of the shoes, worn for years, is practically zero, so your profit is $20 minus your cost.

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    Part of your answer feels like good common sense, and yet, if there's a buyer, willing to pay $20 for shoes, by definition, they are not worthless. This isn't like business equipment that has a depreciation schedule, and after say, 5 years of tax write-offs, has a zero $ basis. I don't know how the IRS will distinguish between one buying and selling used goods for profit vs a person selling off decades of accumulated possessions. Feb 7, 2022 at 13:03
  • @JTP-ApologisetoMonica The IRS distinguishes between personal items and investment items. If you buy a car for $20k, drive it for personal use, and sell it five years later for $5k, you can't claim a $15k deduction on your taxes, because that $15k wasn't an investment loss; you received $15k of personal use from the car. That being said, while the $15k isn't a deductible loss, the $5k probably isn't a taxable gain either. So I don't think this answer is correct in saying that there's a $20 taxable gain in the case of the shoes. Feb 7, 2022 at 15:38
  • @Acccumulation - agreed, 100%. Certainly can't claim a loss, but it would be a rare case when selling one's own goods is a taxable event. Of course, I don't mean any type of collectible, coin, jewels, etc. I am referring to household goods, typical yard sale items. Feb 7, 2022 at 15:44

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